Japan's aluminium fabricators beef up US output, betting on rising auto use

The move is set to intensify competition with rivals such as Alcoa that are aggressively investing in the world's second-biggest automobile market, and with steelmakers defending their traditional auto business through the use of lighter products.Reuters | July 15, 2016, 12:32 IST

TOKYO: Japanese aluminium products makers such as UACJ Corp and Kobe Steel are boosting output capacity in the United States in a bid to snare market share as automakers turn to the lighter metal to meet stricter environmental rules.

The move is set to intensify competition with rivals such as Alcoa that are aggressively investing in the world's second-biggest automobile market, and with steelmakers defending their traditional auto business through the use of lighter products.

UACJ, Japan's biggest rolled-aluminium products maker, began production of sample aluminium sheets for autos last month at a new $150 million plant in Kentucky, built with Dutch partner Constellium, with an annual output capacity of 100,000 tonnes.

The company also spent $155 million earlier this year to buy SRS Industries, a Michigan-based US manufacturer of automotive aluminium structural materials.

"We are also considering an expansion of the joint venture with Constellium, possibly adding two more finishing lines to triple capacity to meet rising demand," UACJ Senior Managing Executive Officer Takayoshi Nakano told Reuters in an interview.

Faced with tougher environmental rules, car makers in the US and Europe are turning to aluminium over steel for exterior body panels and structural components. Aluminium can cut the weight of a car by about 30 percent and can be more easily recycled, reducing its life-cycle emissions.

While aluminium has been used in premium-brand cars for decades, the latest moves by fabricators follow the success of Ford Motor's best-selling F-150, its first aluminium-body pickup truck.

UACJ is betting aluminium sheet used in passenger vehicles will rise at least ten-fold to a million tonnes by 2025, after automakers in the United States start adding them to popular sedans from around 2019 or 2020.

Nakano said the company aimed to win about 20 percent of the US aluminium automotive sheet market.

"Our expectation is the trend in the US and Europe to use aluminium for auto bodies and structural frames will eventually spread to other areas like China and Southeast Asia where we want to take the lead," he said.

Kobe Steel, which makes both aluminium and steel, said in May it will invest $46.7 million to build an aluminium plant in Kentucky to build parts for car frames and bumpers, and also wants a plant for aluminium sheets.

While aluminium has been used in premium-brand cars for decades, the latest moves by fabricators follow the success of Ford Motor's best-selling F-150, its first aluminium-body pickup truck.

"We are still looking to invest in the US market to make aluminium sheets, although the timing is not known yet," Kobe Steel President Hiroya Kawasaki told a news conference on Tuesday.

BOOSTING CAPACITY

Other companies are also boosting their automotive sheet capacity to meet expected demand growth, even though aluminium typically costs at least twice as much as steel.

Alcoa, which has been shutting aluminium smelters due to falling prices, completed a $300 million expansion in 2014 at its Davenport, Iowa sheet products plant and raised capacity at its rolling mill in Alcoa, Tennessee in 2015.

In 2013, top rolled aluminium producer Novelis, a unit of India's Hindalco Industries, said it would spend more than $300 million to boost capacity at its automotive sheet plant in Oswego, New York.

"We expect aluminium use per vehicle will grow to 500 pounds (227 kg) by 2025 from 390 pounds in 2015," said Tom Boney, chairman of the US Aluminum Association's transportation group, citing tougher emission targets and wider consumer acceptance in terms of safety.

Investment in the Japanese market, however, is limited due to close ties between automakers and steelmakers, who have focused on developing lighter, stronger steel, along with improving fuel efficiency by upgrades to engines and parts.

Nippon Steel & Sumitomo Metal Corp, Japan's top steelmaker, has developed a 25-percent stronger high-tensile steel, which means automakers can use less to cut weight, and plans sales around 2020, a spokesman said.

But Kobe Steel's Kawasaki said Japanese automakers are under pressure to further cut vehicle weight and are expected to adopt aluminium for structural frames from 2020 or 2021.

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In 2018, automobile demand remained robust despite the slowdown overcast in the last three months of year. All segments reported strong double-digit growth in the calendar year ending December 31 except passenger vehicles which reported a growth of 5 per cent. Three-wheelers sales grew fastest followed by commercial vehicles, two-wheelers, and passenger vehicles. The overall automobile sales crossed 26.7 million units for the first time.

In 2018, automobile demand remained robust despite the slowdown overcast in the last three months of year. All segments reported strong double-digit growth in the calendar year ending December 31 except passenger vehicles which reported a growth of 5 per cent. Three-wheelers sales grew fastest followed by commercial vehicles, two-wheelers, and passenger vehicles. The overall automobile sales crossed 26.7 million units for the first time.